Apergis, Nicholas, Mustafa, Ghulam and Malik, Shafaq (2023). The role of the COVID-19 pandemic in US market volatility: Evidence from the VIX index. The Quarterly Review of Economics and Finance, 89 , pp. 27-35.
Abstract
We examine how the implied volatility in the US financial market has been affected by the COVID-19 pandemic. We decompose the Chicago Board Options Exchange (CBOE) Volatility Index (VIX) into two implied volatility conditions (i.e., low and high), and COVID-19 pandemic cases and deaths into two categories (i.e., low and high). Our novel quantile-on-quantile regression approach allows us to better examine the dynamic relationship between the COVID-19 pandemic and implied volatility. Our empirical results show that increased death rates tend to increase fear in the US financial market. Specifically. we find that high COVID-19 cases have a significant impact on implied volatility under high uncertainty conditions, but low COVID-19 cases appear to have no impact on implied volatility in the US market. Our findings offer support to the US policy response by the Federal Reserve Board and the government to limit the instability effect of the COVID-19 shock on the financial markets.
Publication DOI: | https://doi.org/10.1016/j.qref.2023.03.004 |
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Divisions: | College of Business and Social Sciences > Aston Business School > Economics, Finance & Entrepreneurship College of Business and Social Sciences > Aston Business School |
Additional Information: | © 2023 The Authors. Published by Elsevier Inc. on behalf of Board of Trustees of the University of Illinois. This manuscript version is made available under the CC-BY-NC-ND 4.0 license https://creativecommons.org/licenses/by-nc-nd/4.0/. The version of record can be found here: https://doi.org/10.1016/j.qref.2023.03.004 |
Uncontrolled Keywords: | COVID-19,Forecasting,Quantile-on-quantile regression,VIX,Finance,Economics and Econometrics |
Publication ISSN: | 1062-9769 |
Last Modified: | 09 Dec 2024 08:57 |
Date Deposited: | 08 Mar 2023 10:41 |
Full Text Link: | |
Related URLs: |
https://www.sci ... 0303?via%3Dihub
(Publisher URL) http://www.scop ... tnerID=8YFLogxK (Scopus URL) |
PURE Output Type: | Article |
Published Date: | 2023-06 |
Published Online Date: | 2023-03-05 |
Accepted Date: | 2023-03-02 |
Authors: |
Apergis, Nicholas
Mustafa, Ghulam Malik, Shafaq |
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Version: Accepted Version
Access Restriction: Restricted to Repository staff only until 5 March 2025.
License: Creative Commons Attribution Non-commercial No Derivatives